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Fees do not ‘legitimise’ brokers

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Australian Broker | 11 Oct 2012, 06:30 AM Agree 0
An industry figure claims yesterday’s comments on a fee-for-service model is ‘insulting to brokers’, and argues fees are not what make brokers legitimate
  • BJ | 11 Oct 2012, 11:03 AM Agree 0
    For Mark to suggest "it is an insult to the industry" reflects a very narrow and paternalistic view.

    Several issues arise from the fee for service debate which extend to a brokers ability to transfer his/her book (independence of ownership), the quality of advice, lender volume requirements.

    The industry attempts, but fails to compare the role of the broker to that of a professional advisor. We are some distance from being regarded as professional advisors, because put bluntly, consumers do not see brokers as professional advisors but rather as sales people. Hard to accept but true.
    We stand behind the gross statement that we can offer loans from every lender when in reality the Joe average broker has, what, about 6 accreditations. This is not a professional industry when approaching 50% of brokers are part time, akin to Amway and party planners.

    So yes Mark, on these statistics it would be very difficult to justify a fee for service. Particulary more difficult for the aggregator to control revenue and justify their place in the market under a fee for service model.

    Professional full time brokers can and will prosper under a genuine fee for service model, however the business model to work will be quite different from the existing broker aggregator approach.
  • Sydney Broker | 11 Oct 2012, 12:18 PM Agree 0
    The banks will love the fee for service model as it will enable them to drop or stop paying commissions.

    BJ - did you make up that statistic? There is no way that 50% of brokers are part time, since licencing came in.
  • Paul | 11 Oct 2012, 12:31 PM Agree 0
    The point Mark is trying to make is fairly simple - you don't achieve legitimacy just through charging a fee for your service. Anyone who claims they're a superior broker to another just based on the fact that they charge for their service needs to take a closer look at how they market themselves.
  • Steve McClure | 11 Oct 2012, 02:38 PM Agree 0
    Spot on Paul. But, if a broker successfully charges fees, all power to them. I started broking in 1992 and had to charge fees. I grew, but the industry didnt take off until lenders and clients recognised the cost efficiences of commissions. Sure, they arent the only model, but certainly, without the current regime we'd have never reached 40% market share, let alone established an industry. Why go backwards?
  • Coast Broker | 11 Oct 2012, 06:13 PM Agree 0
    I agree with both Paul and Mark however is it just Loan Markets way of saying that by charging a fee for service means Loan Market misses out on additional income like other Agregators have stated before.
  • Derek Miles | 12 Oct 2012, 10:45 AM Agree 0
    I think there are two aspects to this fee charging debate. If all a broker does is arrange a loan for a client by recommending a product and lender then it would be hard to charge a fee (that is, they could go directly to the lender by doing a little bit of e-research. On the other hand, if the broker goes beyond this by providing advice about how to pay the loan off faster, build wealth with debt etc etc, then a fee could be charged because the client benefits from the advice. So I think that any argument about fee charging should be looked at in context with what service the broker is providing to the client. It is not a one shoe fits all proposition.
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